Despegar.com, Corp. (DESP): Are Hedge Funds Right About This Stock?

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In this article you are going to find out whether hedge funds think Despegar.com, Corp. (NYSE:DESP) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Despegar.com, Corp. (NYSE:DESP) ready to rally soon? The smart money was turning bullish. The number of bullish hedge fund positions inched up by 3 in recent months. Despegar.com, Corp. (NYSE:DESP) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that DESP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Do Hedge Funds Think DESP Is A Good Stock To Buy Now?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in DESP a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is DESP A Good Stock To Buy?

The largest stake in Despegar.com, Corp. (NYSE:DESP) was held by Tiger Global Management LLC, which reported holding $105.3 million worth of stock at the end of December. It was followed by Ancient Art (Teton Capital) with a $44.7 million position. Other investors bullish on the company included Cartica Management, Bares Capital Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Cartica Management allocated the biggest weight to Despegar.com, Corp. (NYSE:DESP), around 5.44% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, dishing out 4.34 percent of its 13F equity portfolio to DESP.

As one would reasonably expect, key hedge funds have jumped into Despegar.com, Corp. (NYSE:DESP) headfirst. Cartica Management, managed by Teresa Barger, established the most outsized position in Despegar.com, Corp. (NYSE:DESP). Cartica Management had $20.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $7.3 million investment in the stock during the quarter. The following funds were also among the new DESP investors: Christopher Hillary’s Roubaix Capital, Israel Englander’s Millennium Management, and Peter Muller’s PDT Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Despegar.com, Corp. (NYSE:DESP) but similarly valued. We will take a look at Mercer International Inc. (NASDAQ:MERC), HomeStreet Inc (NASDAQ:HMST), Pampa Energia S.A. (NYSE:PAM), Donnelley Financial Solutions, Inc. (NYSE:DFIN), The Geo Group, Inc. (NYSE:GEO), Fanhua Inc. (NASDAQ:FANH), and Lindblad Expeditions Holdings Inc (NASDAQ:LIND). This group of stocks’ market values resemble DESP’s market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MERC,13,146360,-2 HMST,12,57287,0 PAM,5,45253,-1 DFIN,16,134133,1 GEO,13,72580,-5 FANH,7,2532,-1 LIND,11,105194,0 Average,11,80477,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $218 million in DESP’s case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Pampa Energia S.A. (NYSE:PAM) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Despegar.com, Corp. (NYSE:DESP) is more popular among hedge funds. Our overall hedge fund sentiment score for DESP is 85. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately DESP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on DESP were disappointed as the stock returned -5.5% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.